Engineering feeling the squeeze in western economies

SCOTLAND’S engineering sector has begun to feel the pinch from the slowdown in major western economies, with smaller companies suffering a slump in overseas orders, research today suggests.

Publishing its final quarterly review of the year, Scottish Engineering warned that the economic uncertainties that have been affecting the eurozone and US for some time were now being felt in “certain sectors” of the manufacturing engineering industry.

It said small companies were seeing orders “fall away”, both at home and particularly in export markets.

A brighter picture was painted for larger businesses, where orders were found to be pushing ahead, with output volumes healthy and staffing levels continuing to grow.

The evidence of the existence of a “twin-speed” engineering sector north of the Border follows a warning yesterday that UK manufacturers are facing a “bleak winter” after further falls in orders and staff levels last month.

The Markit/Cips purchasing managers’ index (PMI) survey, where a reading below 50 indicates a contraction, fell to 47.6 in November, down from 47.8 the previous month and its lowest since early 2009, when the UK was in recession.

The downturn in output accelerated in the month, leaving the sector on track to contract in the final quarter of 2011, as the eurozone debt crisis hit exports and confidence at home.

Scottish Engineering’s review, conducted in conjunction with Dunfermline-based M&C Energy, polled 150 companies and spans the three months to November.

The total order intake for the industry was negative for the first time after six quarters of growth in a row.

More than a third – 37 per cent – reported their orders were down, 29 per cent said they were the same, while 34 per cent reported they had increased.

For small companies – classed as those with less than 100 staff – 42 per cent said orders had fallen, 24 per cent reported they were the same, and 34 per cent noted that they had increased.

Peter Hughes, chief executive of Scottish Engineering, said: “We are heartened by the fact that, throughout all sizes of company and in all sectors except metal manufacturing, prices are holding up.

“Our industry is experiencing constant increases in raw materials and energy costs that necessitates putting up prices and this is being accepted by customers.”

The review also found there was an “ever-increasing demand” for engineers at graduate, technician and craft levels.

One of the few bright spots in the UK-wide PMI survey was news of the first decline in input prices since July 2009, easing the pressure on inflation.

• China’s manufacturing activity touched a 32-month low in November, hurt by a slowdown in the global economy, figures yesterday showed.